Seizure of the subject of a registered pledge during proceedings for the approval of an arrangement

The following arguments support the admissibility of the pledgee taking possession of the subject of the registered pledge after the announcement of the arrangement date (initiating the proceedings for the approval of an arrangement).

Firstly, the only moratorium relevant to the proceedings for the approval of an arrangement is provided for in Article 312 in conjunction with Article 226e of the Restructuring Law, pursuant to which enforcement proceedings directed at the debtor’s assets during proceedings for the approval of an arrangement are suspended by operation of law.

Enforcement proceedings concern procedural acts governed by public law. By contrast, the seizure of the subject of a registered pledge leads to the satisfaction (in whole or in part) of the creditor outside of enforcement proceedings by means of a substantive legal act governed by private law.

Secondly, it is clear from the plain wording of the Preventive Directive itself that the Polish legislature has correctly transposed the provisions of that act into national law, i.e. in a manner that falls within the range of possible national options permitted by the EU legislator.

In accordance with Article 2(1)(4) of the Preventive Directive, “the suspension of individual enforcement measures” means a temporary suspension, granted by a judicial or administrative authority or applied by operation of law, of the creditor’s right to enforce a claim against the debtor and, where provided for in national law, against a third party providing security, in the context of judicial, administrative or other proceedings, or the right to seize or sell the debtor’s assets or business out of court.

The list of individual enforcement measures is broad, but always includes a temporary suspension of the creditor’s right to enforce a claim against the debtor and, as an alternative (‘or’), the right to seize or sell the debtor’s assets or business out of court.

The option for Member States to suspend the right to seize or sell, through out-of-court proceedings, the debtor’s assets or business is also referred to in Article 1(5) of the Preventive Directive, according to which the preventive restructuring framework provided for under this Directive may comprise one or more proceedings, measures or provisions, some of which may be applied in an out-of-court context, without prejudice to any other restructuring framework under national law.

Furthermore, it is clear from recitals 34–36 of the Preventive Directive that the stay of individual enforcement actions (in whatever form) is an ad hoc, temporary measure which should strike a balance between safeguarding the interests of the debtor and those of the creditors.

It follows unequivocally from the above recitals that the national legislature could (within the scope of the national option) but was not obliged to provide for a stay of the seizure of the pledged asset. In that case, however, it would be a necessary condition to clearly specify a short (four-month) stay period, which may exceptionally apply for twelve months, and to respect the interests of creditors.

These considerations are reflected in Article 6 of the Preventive Directive.

In particular, pursuant to Article 6(3) of the Preventive Directive, Member States may provide that the stay of individual enforcement measures may be general, covering all creditors, or may be limited to one or more individual creditors or categories of creditors.

Furthermore, the initial period of suspension of individual enforcement measures is limited to a maximum of four months (Article 6(6) of the Preventive Directive).

The total period of suspension of individual enforcement measures, including extensions and renewals, may not exceed twelve months (Article 6(8) of the Preventive Directive).

The view regarding the application of the concept of incidental horizontal effect of the directive in this case is also incorrect. According to established case law, under this concept it is not permissible to create (even by a court) new obligations for an individual, but rather to disregard national legislation that conflicts with the directive.

In its judgments in the Pafitis and Ruiz Bernaldez cases, and subsequently in the CIA Security and Unilever cases, the CJEU allowed for the provisions of the directive to be invoked in disputes between private parties, but only as a benchmark for assessing specific national regulations. However, invoking a provision of the directive as a benchmark for assessment – including in disputes between private parties – can only lead to the disregard of national standards (regulations), without resulting in the imposition of an obligation on a private party.

The incidental direct effect of the directive does not therefore constitute an exception to the prohibition on imposing obligations on individuals through the provisions of the directive.

Furthermore, the opening of restructuring proceedings cannot be equated with the announcement of the date of the arrangement, which is clearly reflected in the literal interpretation of, for example, Article 299(2) of the Commercial Companies Code, Article 300(132)(2) of the Commercial Companies Code, or Article 373 of the Insolvency Law.